Nigeria's tech industry is held back by basic problems like unreliable electricity

Co-Creation, a tech hub in Lagos (TechCabal)
  • A new survey finds frequent power outages a major constraint for Nigeria's tech sector.
  • The survey conducted by the Center for Global Development and ONE Campaign, covering 93 tech firms.
  • Nigeria has witnessed some high-profile Silicon Valley investments over the years and emerged as the premier investment destination with 55 active tech hubs raising a total of $94.9 million in 2018.

Despite witnessing some high-profile investments, Nigeria’s tech industry is struggling with much more basic problems, like unreliable electricity.

A new survey of the country’s tech sector by the Center for Global Development and ONE Campaign found out that an average tech firm witnessed more than 30-hour power outages per month.

The outcome of the survey raises concerns about the fundamentals of the business environment, as 57% of tech entrepreneurs said reliable power access is a major obstacle to their business.

The survey covered 93 tech firms, which encompasses the majority of Nigeria’s tech industry. Firms were asked about a range of potential business obstacles, including access to credit and electricity, corruption, taxation, the legal system, and more. Political instability, access to finance, and reliable power were the most severe constraints, according to respondents.

  • 57% of tech firms surveyed said reliable access to power was a “major” or “severe” obstacle to their business.
  • 53 of the tech firms surveyed reported 30+ outages, and another 22 reported more than 20 outages per month.
  • A typical power outage was 2-3 hours for most firms, although for a significant group (about 15%), the lights usually stay off for 5 or more hours at a time.
  • A third of firms surveyed report losing more than 20% of their sales due to power outages.

Everyone is talking about 5G access or startup accelerators, but we found Nigeria’s tech industry is struggling with much more basic problems, like unreliable electricity. The firms we talked to are dealing with dozens of power outages per month. That’s hard for any business, and especially for a technology company,” said Vijaya Ramachandran, one of the authors of the report and a senior fellow at the Center for Global Development.

Nigeria spent N1.164 trillion on the power sector in 8 years

Unreliable power supply is a huge problem in Nigeria. Between 2011 to 2018, the Nigerian government has spent about N1.164 trillion on the power sector without improvement, The ICIR, an investigative platform, quoted a document from the Office of the Accountant General of the Federation.

We know that unreliable power is a huge issue across Nigeria, and now we have data on just how badly outages are affecting technology companies. Big private investments and government-sponsored tech hubs can be helpful, but Nigeria needs to get the basic business environment right first. That means providing the energy infrastructure all businesses need to flourish,” Ramachandran said.

The study recommends that the government should review its tech sector policies, including pioneer status for tax incentives.

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